"To avoid making an unpopular war even more unpopular, President Johnson decided to ignore the recommendations of his economic advisors and chose not to raise taxes when they should have been raised in 1965, 1966 and 1967. America was to have a war but it was going to pay for the war covertly with inflation and not overtly with taxes. When the demand for leather to make military boots increased, there was simply going to be less leather left over for civilian shoes...it was widely predicted by economists in and out of the government that the war was going to create excess-demand inflation."
Lester C. Thurow, Dangerous Currents: The State of Economics
, Random House, New York (1983) pp. 53-54.
In lieu of raising taxes, Bush has triangulated the spending for the War on Iraq by capitalizing on excess production, T-bills held by China, and the economic downturn following 9-11. But with an expenditure of $2 trillion, the inflationary momentum is catching up. By all rights, a very dangerous moment awaits Mr. Bush.